At the sprawling, luxurious Edgemere retirement center in Preston Hollow, which has a spa, wine cellar and a hushed “Tuscan mansion” ambience, wealthy residents enjoy a life of leisure that is advertised as a relaxing yet stimulating vacation.

That vacation was interrupted several months back when many of the residents received an anonymous letter accusing Edgemere’s management of diverting millions of dollars of the retirees’ money.

The dispute soon moved to state district court, where Edgemere’s top executive sought to silence an ex-vice president who alleged financial improprieties.

As one of Edgemere’s marketing slogans says, “Everything in life should be sensational.” With assertions of risky deals, misapplied funds, a conflict of interest and an attempted corporate coup, the potential courtroom battle could be.

Charles Brewer, Edgemere’s CEO, said he had one goal when he asked a judge to issue a temporary injunction against former vice president David Brown. “I did it,” Brewer said, “to shut his ass up.”

That seems not to have worked. Brown filed a lengthy legal answer, which included accusations of “unethical and fraudulent behavior at the very highest level of our organization.” He was speaking specifically of Brewer.

Brewer has denied the allegations, and said his company has a national reputation for quality and financial savvy.

“We’re a star in this business,” he said.

Covering 16 sedate, impeccably landscaped acres along Northwest Highway, Edgemere is a continuing care retirement community, meaning it provides a graduated level of services on-site. A typical resident may start out as independent, later move to assisted living and finally need skilled nursing care, all without leaving Edgemere.

Such arrangements don’t come cheap. Entrance fees run from $300,000 to $800,000, depending on the size of the apartment. In addition, monthly fees range from $2,500 to $5,000 per unit. When the resident dies, 90 percent of the entrance fee is refunded to his or her estate, or a designated charity.

“Edgemere attracts a unique group of people,” its website says. These are “business leaders and professionals who are right at home here, having served the Dallas community and Texas for decades.” About 500 retirees live there, many of them from the Park Cities.

For them, Edgemere offers a “five-star retirement lifestyle” that includes a gourmet restaurant, an indoor heated pool, a nine-hole putting green and concierge service.

Indiana project

Senior Quality Lifestyles Corp., a Dallas not-for-profit, owns and operates Edgemere. SQLC also owns continuing care centers in Austin, Houston, Corpus Christi and Fort Worth, where it built the Stayton at Museum Way.

The trouble began when Brewer — who also is the president of SQLC — said he was approached by Greystone, an Irving-based management company, about an investment. Greystone has a long history of working closely with SQLC. Now it was proposing that SQLC take over a project called The Barrington, a planned $119 million continuing care community in Carmel, Ind.

Greystone had initially been unable to secure financing. In December, according to Brown’s court filing, Brewer announced to his staff that SQLC “was going to ‘plant our flag in Indiana’ and be the ‘white knight’ to ‘bail out’ Greystone on the Barrington project.”

But then-vice president Brown opposed the deal.

“Dave kept finding things he didn’t like,” Brewer said. “As his ego has soared, he became much more difficult to deal with, much more of a bully.”

Brown, who had previously worked for Greystone, said ego had nothing to do with his opposition. He was worried, he said, that the market for continuing care communities in that part of Indiana was saturated.

“They already had plenty of product on the ground,” he said.

The last few years have been difficult for many continuing care communities, in large part because of the depressed housing market. Many seniors must sell their houses to pay their continuing care entrance fees.

Nationally, a couple of high-profile continuing care companies have declared bankruptcy, and hundreds have had trouble meeting performance requirements put in place by holders of bonds used to pay construction costs.

The Texas Department of Insurance, which licenses and regulates the financial operations of continuing care communities, placed two of them in an enhanced form of regulation known as administrative oversight in 2009. The two — Eagle’s Trace in Houston and Highland Springs in Dallas, neither of which were owned by SQLC — have since been released from the oversight.

Although the communities give their buyers the reassurance of long-term residence and care, “residents can still face considerable risk,” said a 2010 report by the U.S. Government Accountability Office. “Should a CCRC failure occur, it could cause residents to lose all or part of their entrance fee.”

Optimism

Larry Minnix, president of LeadingAge, a senior living trade group, said he sees little risk of that happening, because the economic outlook for continuing care is improving.

“It’s been stressful for those that had recently opened,” he said of the past few years. “But we think we’ve weathered the storm.”

CEO Brewer said in an interview that SQLC properties have done well despite the general economic climate.

“We have 98 percent to 99 percent of our units sold,” he said. “Other people would kill to have our numbers.”

One SQLC project, the Mirador in Corpus Christi, has run into some problems. The center, which opened last year, has not met its bond requirements for occupancy in all months. And its cumulative cash operating losses have exceeded bond covenant limits.

SQLC was therefore required to hire a consultant, which recommended this month that sales and marketing efforts be increased.

Regarding the Indiana project, Brown believed it was a bad move for SQLC, even in a somewhat improved national market. When not enough buyers had signed up, developers were forced to lower prices. And when he learned that Brewer had personally invested in the deal, Brown thought he had discovered a serious conflict of interest.

So Brown filed a formal whistle-blower complaint with the chairman of SQLC’s board of directors.

“I am now faced with coming forward to report an abuse of power and disregard for corporate policy at the very highest level of our fine organization,” he wrote.

The board hired an independent attorney to investigate. The lawyer, Carvan E. Adkins, concluded that while Brewer “was late in making his disclosure of his personal interest” in The Barrington, SQLC was not harmed “by any material measure.”

That same week, Brewer fired Brown.

“That really rocked my world,” Brown said. “I thought I had found a home here.”

The letter

One day after Brown’s termination, a form letter turned up in hundreds of mailboxes at Edgemere, addressed to the residents.

“A terrible misuse of your money is occurring at the direction of Mr. Charlie Brewer,” it said. “Edgemere money is now being taken out of the property’s accounts to bail out a development that Charlie Brewer and his other partners at Greystone are personally invested in.”

The note concluded with the warning that “the IRS fraud department will be getting a copy of this letter with additional details.” It was signed, “A Concerned Employee.”

Brown denies that he wrote the letter. But Brewer said he has no doubt that Brown was the author, based on phrasings and intonations.

Brewer filed his court action against Brown on June 13. In it, he accused Brown of using the letter to damage Brewer and SQLC. And if Brown didn’t actually write the letter, Brewer’s petition claimed, he engaged in a conspiracy to “accomplish an … unlawful purpose by unlawful means.”

In a later interview, Brewer said Brown’s actual motive was to seize control of SQLC.

“Dave thought if he could get rid of me, he would be the one to run this company,” Brewer said. A retired Marine lieutenant colonel, Brewer added that such an idea was ridiculous because Brown was a “middle management slug.”

Brown’s lawyer, H. Dustin Fillmore III, said he had no comment on Brewer’s assessment of Brown’s motives. But Fillmore filed a 37-page response to Brewer’s petition, and in it elaborated on some of the same issues raised in the anonymous letter.

“Using Edgemere as a ‘cash cow’ for the benefit of Greystone’s struggling project in Indiana was fraudulent conduct as to the residents of Edgemere,” Brown’s filing said. “In the previous three years alone, SQLC has transferred millions of dollars from Edgemere’s operational cash flow in ‘grants’ to finance other property investments.”

John Falldine, Edgemere’s managing director, said the company’s assets have been properly invested in the Indiana project.

“It’s not like we can take that money and stick it in a mattress somewhere,” he said. “We’ve got to invest it.”

In a series of interviews, Brewer urged The Dallas Morning News not to run a story about the court fight because it would upset Edgemere’s residents, and because his legal filing was never intended as a traditional damage claim.

“I don’t think SQLC can get a judgment against Dave, because I don’t think we can prove damages,” he said. “We were never going to go forward with the case. … What if I dropped the suit?”

On Oct. 17, Brewer did just that, asking the court to dismiss his action without prejudice.

“That means if Brown were to do anything in the future like he has done in the past, we could go back to court,” Brewer said. “I’m hopeful he will put his sword back in his sheath and go on with his life.”

But last week, Brown’s lawyer would not rule out filing a separate claim against Brewer.

“Their lawsuit was a vindictive, continuing effort to retaliate against our client to punish him for whistle-blowing, and they have harmed our client very badly,” Fillmore said. “We are reviewing our options as to what, if anything, can be done about this.”

In the meantime, bonds have been sold for The Barrington of Carmel, with a wholly owned SQLC affiliate assuming the $119 million debt obligation. Construction has begun, and it is scheduled for completion in late 2013.

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